Chapter 5
With the approaching of the third anniversary of China¡¯s accession to the WTO in 2004, the Shanghai Administration of Industry and Commerce (SAIC) has, through overcoming difficulties inherent in the traditional market governance ideologies, resources and mechanisms, been stepping up efforts to further mobilize, consolidate and optimize market governance resources, to establish a more effective, efficient and functioning mechanism, and to create a more fair, equitable and open market environment for the healthy, harmonious and sustained socio-economic development.
I. Establishing a WTO-compatible Market Access Mechanism Through Reforming the Registration Regime
In 2004, the SAIC has, in compliance with China¡¯s WTO accession commitments, deepened the reform of open governance and administrative licensing in order to establish a market access mechanism consistent with WTO rules and improve the market administration regime conducive to the development of the socialist market economy.
1. Increasing the Transparency and Predictability of Business Registration
(1) The adjustment of registration process. In accordance with the Law on Administrative Licensing and pertinent regulations by the National Administration of Industry and Commerce, the registration procedures for companies and self-employed individuals have been adjusted, a total of 18 legal documents of various categories modified, and the items to be examined and approved prior to the registration pruned.
(2) The disclosure of relevant information. Nine business registration items have been published on the website, such as legal basis of registration, conditions of registration, process of registration, time limit to complete registration, the checklist of application materials, the scale and the basis of registration fees, and the model samples of application documents.
(3) The provision of corporate names search service. On-line search service for corporate names that have already been locally registered has been provided in order to increase the efficiency, openness and transparency of business registration and to provide convenience to enterprises and private individuals.
(4) The construction of the support system of registration examination. A support system to examine and supervise business registration is currently being prepared so as to further facilitate, normalize and uniformize the registration process and help to analyze and utilize the registration data.
2. Deepening the Reform of the Administrative Licensing Regime
To further optimize the investment environment and to ensure non-discriminatory market access, the SAIC has continued its efforts in improving the system of ¡°responsibility for the truthfulness of declaration¡± and procedures for online application and approval.
The Notice of Implementing the System of ¡°Responsibility for the Truthfulness of Declaration¡± in Administrative Examination and Approval issued by the municipal government went into effect as from April, 2004. To further increase the efficiency of administrative examination and approval, the SAIC has put into operation on a trial basis the web-based application procedures for licensing clearance.
3. Strengthening the Coordination with Other Departments in Promoting the Governance Quality of Open-up
In accordance with the Law on Administrative Licensing, the SAIC has defined the procedures of nullifying administrative licenses. In July, 2004, the State Council decided to cancel administrative examination and approval regarding the establishment in China of 9 categories of resident representative offices of overseas enterprises. The SAIC was quick in coordinating with other government departments to ensure the smooth transition from administrative licensing to direct registration regarding the set-up of overseas companies¡¯ resident representative offices in Shanghai. At the same time, a detailed direct registration process was, in a timely manner, worked out and published on the website to apprise the overseas companies intending to set up resident representative offices in Shanghai of the new registration procedures.
4. Implementing the Pilot Project of Business Registration Officer
The SAIC has pressed forward with various reforms in business registration. From November, 2004, the system of business registration officer has been put into trial implementation. It is expected that this system will significantly improve the accountability, specialization and professionalism of the government employees engaged in enterprise registration, overcome the defects in the current assessment mechanism of their performance, and bring about far-reaching changes in business registration.
Box 5.1 Promoting E-Government and Innovating the Market Supervision and Administration Mechanism
To promote fair competition and to increase government efficiency, the SAIC has intensified its efforts in enhancing the transparency of government conduct and providing convenience to businesses through information technology. For example, Internet-based annual inspection and verification procedures have been put into operation. The number of enterprises that have through the Internet cleared annual inspection and verification reached 60,729 in 2004, accounting for 14.19% of all the enterprises subject to annual inspection and verification, an increase of 1.61% over the previous year. Information such as the reminder of annual inspection and the notice of enterprise license withdrawal has also be promptly posted on its homepage.
In the wake of China¡¯s accession to the WTO, as a result of the advancement in information technology and with the emergence of an increasingly globalized world economy, new and different types of market players and market transactions have appeared on the Chinese market. In response to such new developments, the SAIC has, on the basis of WTO rules and the demands of modern market economy, transformed its governance concepts and explored innovative means of market administration such as the ¡°classification management method¡± so as to better regulate the market.
II. Transforming Administrative Functions According to the Law to Better Regulate the Market
In light of the new situations following China¡¯s WTO accession and in compliance with China¡¯s WTO commitments, the SAIC has taken various measures in improving the supervision and administration of the market.
1. Actively assimilating overseas resources in market administration by hosting international seminars
To further promote a fair and orderly market competition environment, to enhance the overall competitiveness of Shanghai¡¯s enterprises and to project a favorable image of Shanghai abroad, the SAIC and the Better Business Bureau of the State Administration of Industry and Commerce jointly sponsored the Shanghai International Seminar on Fair Competition and Market Economy on 10 November, 2004. Focusing on relevant stipulations restricting unfair competition in the Law of the People¡¯s Republic of China Against Unfair Competition, the international symposium consisted of four special sessions respectively on (1) competition policies and competition law enforcement, (2) competition law, public utilities sectors and large-scale chain supermarkets, (3) competition law and corporate self-discipline, and (4) competition law and intellectual property rights abuses. International scholars and high-ranking officials from Germany, Russia, South Korea, the United States, Australia, the Organization for Economic Cooperation and Development (OECD), the Competition Bureau of the European Commission delivered keynote speeches at the conference. Also present at the one-day event were senior officials from foreign consulates to Shanghai, high-level business executives, and researchers. The seminar was designed to discuss, among others, the role of fair competition in promoting a healthy market economy. The SAIC has constantly and actively tapped into international market administration resources and practices to fight against unfair competition and market monopoly.
2. Making prompt adjustment in conditions of market entry according to the principles of transparency and equal treatment
According to China¡¯s WTO obligations, the SAIC has promptly reviewed and cleaned up its normative documents, amended and rescinded those which are inconsistent with WTO rules, and reduced and simplified the items subject to examination and approval before the registration of a company. For example, the hosting of a commodity fair has been changed from examination and approval to filing on record after the event, the initial examination and approval process of running a commodity market terminated, and the examination and ratification for dealing in automobiles (excluding cars) canceled.
3. Strengthening the supervision and administration of services market on the basis of the municipal regulation on brokerage
According to the Shanghai Municipal Regulation on Brokerage, the supervision and administration of broker firms in real estate and intermediary agencies in human resources has been reinforced, and the mechanism to regulate broker companies according to their lines of business has been explored. Efforts have also been made in guiding trade associations to build a self-discipline mechanism so as to promote the healthy and orderly development of real estate broker firms and employment agencies.
4. Exploring supervisory mechanism of online business to protect the rights and interests of consumers
Internet-based business is a new form of economic transaction in recent years. Efforts have been made in constantly supervising and monitoring web-based marketing, swiftly responding to consumer complaints against online businesses, and investigating and punishing those firms that have conducted unlawful business on the Internet. Legal cases regarding online business have been systematically collected and seminars on electronic business held to promote the healthy development of Internet-based business.
5. Implementing drastic reforms in annual inspection and verification to ensure national treatment to all enterprises
Drastic reforms have been introduced into the annual business inspection and verification. All the enterprises in Shanghai, including foreign invested companies, now can submit to the authorities of industry and commerce information regarding any changes made in the registered items in their business licenses as well as their production and operation activities, to the truthfulness of which they agree to hold themselves legally responsible, and the industry and commerce authorities will put the information on files. This practice has accorded enterprises of different categories of ownership non-discriminatory treatment.
6. Creating a fair competition environment for advertising firms
In light of China¡¯s WTO commitments and the Administrative Licensing Law, the market entry of advertising businesses has been deregulated. For example, advertising licenses have been terminated, qualification requirements regarding advertising agencies eased, approval procedures for the business scope of advertising simplified, and private domestic advertising firms entitled to act as agents for running international and domestic advertising. The Regulation on the Management of Foreign Invested Advertising Firms jointly issued by the Ministry of Commerce and the State Administration of Industry and Commerce entered into effect in March, 2004. In compliance with China¡¯s WTO commitments, the stipulation that the registered capital of foreign invested advertising agencies shall exceed 300,000 US dollars has been terminated. In the latter half of 2004, more than 3,000 advertising firms were set up in Shanghai.
Box 5.2 The Development of Competition Law and Competition Policies in China and Shanghai
Competition law and competition policies are an effective tool in establishing and ensuring fair competition in the market, maintaining and increasing economic efficiency, and promoting sustained economic growth. Following its entry into the WTO, China has quickened its pace in enacting competition law and strengthened international exchanges and cooperation in this regard. The Tenth National People¡¯s Congress has put anti-monopoly law top on its agenda, and the State Council has also placed the drafting of anti-monopoly law in its work plan for 2004. China signed in May, 2004, a framework document on competition policy dialog with the European Union to strengthen bilateral exchange and cooperation in the area. At the present, the Anti-Monopoly Law of the People¡¯s Republic of China jointly worked out by the Ministry of Commerce and the State Administration of Industry and Commerce has been remitted to the State Council for review and deliberation. The Anti-Monopoly Investigation Office was set up in the Commerce Ministry in September, 2004, to promote international exchanges on anti-monopoly, help in the legislative process of anti-monopoly law, and to launch investigations on monopoly.
Through its competition policies, Shanghai has also been active in pushing market reforms on currently monopolized sectors, such as rail transport, express high way, running water, gas, and port construction. These efforts have increased the openness of the market and promoted the efficiency and quality of the services.
To further explore the role of fair competition in promoting market economy and to create a market environment conducive to fair competition, the SAIC and the Better Business Bureau of the State Administration of Industry and Commerce jointly hosted on 10 November, 2004, the Shanghai International Seminar on Fair Competition and Market Economy. The seminar focused on the Law of the People¡¯s Republic of China Against Unfair Competition and the proposed Law of the People¡¯s Republic of China on Anti-Monopoly, and fell into four special sessions on (1) competition policies and competition law enforcement, (2) competition law, public utilities sectors and large-scale chain supermarkets, (3) competition law and corporate self-discipline, and (4) competition law and intellectual property rights abuses.
Against the backdrop of the deepening of China¡¯s economic restructuring, the accelerating pace in the integration of global economy, and the increasingly intense competition on both domestic and overseas markets, the international symposium on fair trade was the first of kind that has ever been held in Shanghai. The conference is expected to play an active part in creating a more fair and orderly market competition environment, enhancing the comprehensive competitive edge of Shanghai¡¯s businesses, and promoting the healthy social and economic development in Shanghai.
7. Establishing a contract credit rating system of enterprises
In lines with the demands arising from China¡¯s membership in the WTO, the SAIC has been the first in the country to work out its own contract credit rating system of enterprises. In addition, the SAIC has been active in fostering the development of domestic credit rating firms and industry. To promote a healthy market environment, the Shanghai Associations for Contract Credit Promotion were set up in 2004 at the municipal as well as at the district and county levels under the auspices of the SAIC. So far, the 19 Shanghai Associations for Contract Credit Promotion in various districts and counties have a membership of 5,589 enterprises, among which 3,329 enterprises participated in the credit rating. The list of 3,236 enterprises which have excelled in trustworthiness was made readily available to the general public, among which the enterprises rated AAA in their credit ranking account for 12.58%.
III. Creating an Open, Safe and Healthy Environment for Consumers
On the basis of the Shanghai Municipal Regulation on the Protection of Consumer Rights and Interests, the SAIC has stepped up its efforts in cracking down all kinds of encroachment upon consumer rights and interests and in developing an open, safe and healthy environment for consumers.
1. Establishing an open, safe and healthy environment for consumers
The SAIC has intensified its crackdown on the manufacturing and marketing of fake and shoddy products as well as other fraudulent behaviors to consumers in order to safeguard the legitimate rights and interests of consumers. There was once a time when counterfeit New Zealand brandname fruits were rampantly sold on some fruits markets in Shanghai. When this was exposed in New Zealand media, there was a big uproar both in New Zealand and in Shanghai. Instructed by the municipal government, the SAIC launched a city-wide campaign on July 17, 2004, investigating fruits wholesale markets, supermarkets, shopping malls, fruits shops and fruits vendors. Key efforts were directed at fake Zerpri and Enza fruits. On that day alone, a total number of 31 fruits markets, 44 supermarkets and shopping malls, and 249 fruits vendors were investigated. As a result, 7 cases were initiated, 378 kilograms of suspected counterfeit famous brand fruits were confiscated, and 41,006 suspected fake trademark labels were destroyed, thereby protecting the international image of Shanghai.
2. Developing a new mechanism of consumer rights protection in the Yangtze River Delta
In 2004, relevant departments of industry and commerce in Shanghai, Zhejiang and Jiangsu signed the Cooperation Agreement on Protecting Consumer Rights and Interests in the Yangtze River Delta, thus establishing a new mechanism in the protection of consumer rights and interests in the area. On the basis of the agreement, the Yangtze River Delta Center for Sharing and Exchanging Information on Consumer Rights Protection was set up to record consumer complaints and offence reporting as well as to publicize the results of random inspection of products in circulation in the region.
3. Entertaining consumer complaints through the consumer hotlines
The SAIC, together with the Shanghai Association for the Protection of Consumer Rights and Interests, has given due attention to bringing into full play the consumer telephone hotline 12315. In 2004, a total number of 723,603 calls were received, and the number of offence reporting reached 12,649. The settlement of consumer complaints have helped consumers retrieve losses valued at 21,830,000 Yuan RMB.
IV. Improving the Management and Protection of Trademarks
Since China¡¯s WTO accession, new situations and new challenges regarding the governance and protection of trademarks have arisen. On the one hand, in compliance with the relevant stipulations of the TRIPS Agreement, the Law of the People¡¯s Republic of China on Trademarks was amended and came into force on December 1, 2001, and the Enforcement Regulations of the Law of the People¡¯s Republic of China on Trademarks ran into effect on September 15, 2002. The revised Trademark Law has placed new demands on the administration and protection of trademarks. On the other hand, the infringement on famous trademarks has taken new and various forms. The SAIC has closely followed the developments in the violation of trademark laws and promptly responded to trademark encroachment to provide a better business environment with regard to trademark protection.
1. Strengthening the protection of trademarks and taking strong measures against infringement upon trademarks
The SAIC has intensified its campaign against infringement upon the exclusive rights of domestic and overseas trademarks, in particular, the well-known trademarks. In 2004, a series of well-targeted and fully-prepared campaigns were launched city-wide. On the occasion of March 15, the China¡¯s consumer rights and interests protection day, and on the occasion of April 26, the world intellectual property rights day, special law enforcement drives were initiated against forged trademark products. In the latter half of the year, a train of campaigns were directed at drugs and foods with forged trademarks to protect the safety of consumers, at infringement upon well-known registered trademarks, Olympic marks and Shanghai World Expo marks to protect the exclusive rights of trademarks, and at counterfeit packages, labels and trademarks to protect the business environment in Shanghai. These campaigns have produced desirable social impact. Up to June 30, 2004, a total of 766 trademark infringement cases have been initiated, a 23.7% rise over the same period of previous year, a total penalty of 3,480,000 Yuan RMB imposed, 828.69 tons of fake products seized and destroyed, 683,858 false labels found and confiscated.
2. Devoting efforts to eliminating the infringement on world-famous trademarks
In a later highly-publicized campaign devoted to the crackdown on the infringement on 40 world-known brandnames such as LV, the SAIC dispatched 2,972 person-time to more than 200 garments and small commodities markets across the city to investigate trademark infringement. In the end, 55 infringement cases were established, and 42,662 counterfeit products confiscated. With the concerted efforts of relevant government departments, trademark holders and market operators, the campaign has achieved great success. The campaign has also received extensive media coverage in Shanghai. As a result, an effective mechanism of self-discipline has taken shape in the garments and small commodities markets.
3. Fostering the development of local trademarks on the basis of the Shanghai Intellectual Property Rights Strategy
The SAIC has participated in the formulation of policies for developing intellectual property rights in Shanghai, conducted thorough-going research on current situations of Shanghai¡¯s trademarks, and made legislative proposals on the effective protection of well-known trademarks. For example, the SAIC has participated in the drafting of the Shanghai Intellectual Property Rights Strategy, Enforcement Regulations on Encouraging Enterprises to Create Intellectual Property, and Enforcement Suggestions on Promoting Shanghai¡¯s Brandnames.
The SAIC launched the 2004 Shanghai real estate brandname/trademark promotion campaign to increase the trademark awareness of real estate companies, enhance the overall competitiveness of the real estate industry, normalize the real estate market, and promote the healthy development of real estate in Shanghai.
4. Hosting professional training programs on the protection of world-famous trademarks
The SAIC has strengthened ties and cooperation with overseas trademark holders and their authorized agents, and joined forces with trademark protection executives from LV, PRADA, CD, OKLEY and NIKE to sponsor professional training programs on the protection of world-class trademarks.
5. Strengthening international exchanges on trademark management
Together with the European Internal Market Coordination Bureau and the Trademark Office of the State Administration of Industry and Commerce, the SAIC sponsored in 2004 an itinerant seminar to acquaint Chinese enterprises with registration and protection of trademarks. Over 150 participants from foreign and domestic companies, trademark agencies and government departments attended the seminar. Experts from the European Internal Market Coordination Bureau, the World Intellectual Property Rights Organization and the International Trademark Association as well as senior officials from the SAIC delivered keynote speeches on EU trademark registration, Madrid protocol on international registration of trademarks, and China¡¯s trademark registration laws and regulations. In addition, the SAIC and the International Trademark Association jointly hosted the 2004 Trademark Strategy Forum. All these international events have contributed to the increase in the awareness of trademark registration and protection on the part of Chinese enterprises.
I. Building a Better Team in the Shanghai Administration of Industry and Commerce
In 2004, the SAIC attached great importance to building a better team of professional talent. A number of concrete measures have so far been enforced to good effect.
1. Efforts have been made in recruiting better-educated young professionals to its forces. Over the past three years, over 400 university graduates have joined the SAIC.
2. With the introduction of the mechanism of appointing and promoting personnel on the basis of competition and performance, the initiatives and creativity of the SAIC personnel have been brought into full play.
3. Varied and flexible on-the-job training programs have been provided to an average number of around 2,100 people every year in order to update their knowledge and adjust them to meet new challenges in their work.
4. Specific measures have been formulated and enforced to strengthen the construction of the basic level units.
5. Upon the approval the State Administration of Industry and Commerce and the Ministry of Personnel, the system of enterprise registration officer has been put into operation on a trial basis in the SAIC so as to increase the specialization and professionalism of its team.